Groupon/Quiznos Deal Goes for Repeat Customers
"One and done." That’s what a restaurant
manager told us about his experience with daily deal sites a la Groupon and
LivingSocial where a special offer brings customers through the doors who then
never return as they follow more discounts to other places.
A new national
deal offered by Quiznos through Groupon is looking to break through the cherry-picker
mentality and get consumers coming back for more subs and salads. Here’s
the deal: For $25, consumers get a punch card for eight sandwiches or salads,
roughly $50 worth of grub. More than half of Quiznos’ franchisee
stores will be participating.
"I don’t think either Groupon or Quiznos was interested in pursuing
flash-in-the-pan," Michael Roper, Quiznos’ chief operating officer,
told Crain’s Chicago Business. "We wanted an opportunity to generate
new regular customers. For them, repeat business is critically important. It
gives their business value if they can create more value for a customer like
us."
Discussion Questions
Discussion Questions: Are daily deal sites an impediment to retailers trying to capture repeat customers? Will the Quiznos/Groupon deal address that issue?
This is another attempt by a national brand to “make it their way.” We saw FTD try and fail by having split prices for Groupon and their own customers. Groupon works because it is a one time incredible deal for a visit.
You know who will buy this? Loyal Quizno’s customers who already come to the restaurant. And why exactly are franchisees giving 6% of their net for such a program?
According to BlueMauMau, Quiznos is considered one of the 25 worst franchises to buy in 2011 because 37.3% fail. They have to do something drastic but this again is a way to say, “We’re doing something” without doing the right thing which is to find out why they don’t return to begin with.
Sure the college crowd will lap these up and all will deem it a success, but at what cost? That’s why I wrote the book about the heavy risks with such deals.
Lose a little on each one, but make it up in volume. Now there’s a winning idea–NOT! Quiznos has been around awhile and most people have experienced them and either like them or not. Groupon will may attract a few bottom feeders and provide a discount to their regulars, but as a strategy to bring in new business I think it’s a loser. They would be better off with a new product offering or a discounting strategy like the $5 foot long at Subway. If they need a gimmick they’d be better off resurrecting the rats. Like them or not, they created buzz.
The intentions are smart (developing repeat customers) but the experiment may backfire: Quizno’s most loyal customers probably don’t need the incentive to keep coming back. At the same time, customers encouraged to give Quizno’s a try will not be likely to invest $25 in the process when they simply want to buy a sandwich for $5. It’s critically important that merchants overcome the “one and done” syndrome by providing the best possible product, meal or service for “trial” consumers.
I have been at three different franchise group meetings in the last month and at each one heard real data and just comment about Groupon. It all boils down to one main comment. It’s good for Groupon; it has not proved to be good in the long run for the retailer or restaurant.
I see two issues. Obviously the first one is the huge loss of margin. Whether you bleed to death in 10-minutes or 10-hours, you still die. Sure the drinks and chips will boost the margin compared to a $5 for $10 worth of food, but it is still a bad deal for the franchisees.
The other issue is only half of the locations are participating. How happy is a customer who just spent $26 going to be when they find out their local Quiznos doesn’t accept it? I also don’t think a lot of customers will like that they have to use all eight uses at the same location.
No matter how you spin it, you’re still commoditizing yourself for a temporary bump in business.
To get adoption (repeat business) you first have to get trial. However, I agree with Richard that it is unlikely that Quiznos will secure the trail they want with a $25 entry fee. I also agree that if I am a Quiznos customer, I would certainly buy in. I just saved $25 on something I would have purchased anyway.
Interesting to note that the article states more than half of their franchisees bought in. This also means almost half did not. Do you think they know something the other half did not?
Turning your brand into the latest element of the discount death spiral can’t be a good idea. Bob Phibbs is right; the people who’ll purchase the offer are regular Quiznos customers who’d love a good deal. It’s really uncomfortable to watch.
To me, this effort is another example of a promotion tactic being used as a band-aid instead of finding a long-term solution to the shopper problem. If Quiznos has traffic trouble, there’s a bigger issue at the root of that. Be it food, experience, service or whatever, the Groupon promotion is only masking the real issue.
I’d like to know why the 50% of franchisees who opted out did so, and I’d like to spend a few days in their stores listening and observing the shopper experience. I’d also find a way to talk to lapsed customers, to find out why they left.
Groupon is a tactic, it’s not a marketing strategy. Good strategy starts with understanding the core problem. This effort feels like it is lacking some basic strategic pillars. If all it does it give loyal users a discount that costs the operation a hit on margin, it may be time for a strategy overhaul that starts where it should start. With shoppers.
Hey, what is there to lose, as most of the Quiznos in my area have shut down. Groupon will do whatever the customer wants, as long as it gets a cut of the action, so the buyer will ultimately decide if they want to purchase this particular deal. I think Quizno’s has a good sub, and it may help sales for future loyal customers. We’ll see.
This is a great experiment to determine whether 8 visits is enough to create a habit. In any case, using the promotion to encourage more than one visit is a good idea. It may not eliminate cherry-picking altogether because some consumers may visit 8 times and then stop, but it does encourage more visits and/or the potential for creating a habit or loyalty.
The main problem with Groupon is training customers to expect your product at a discount. Instead of breaking that tradition, this deal is only serving to reinforce it! Businesses need to become savvy about targeting different offers to existing and potential customers, so that each one serves its intended purpose.
Let’s go a bit further: Groupon itself is a fad, a company with no real history, a dubious idea and a penchant for dramatic, self-serving and unverifiable press releases…doesn’t this all sound familiar (insert favorite failed dotcom company name here )?
If a sandwich is worth $3 eight times, will it ever be worth $6 again?